Bloomberg News

EU Carbon for 2012 Rises to 5-Week High as Volume Reaches Record

October 17, 2012

European Union carbon permits for December rose to their highest level in more than five weeks as volumes traded set a record for the contract.

The contract jumped 3.5 percent to close at 8.28 euros ($10.87) a metric ton on the ICE Futures Europe exchange in London, the highest since Sept. 7. United Nations Certified Emission Reduction credits rose at a slower pace, driving the EU premium over the offsets to a record 6.70 euros a ton.

Traders appear to be betting the European Commission may have some success in dealing with a glut of supply through 2020, said Matteo Mazzoni, an analyst for NE Nomisma Energia Srl in Bologna, Italy.

“The market tries to anticipate what’s going on in Brussels,” he said today by phone. “I’m quite surprised to see prices so high.”

The European Federation of Energy Traders, a lobby group that represents about 100 power, coal and oil companies, suggested the region could boost the pace of yearly carbon- reduction cuts in its emissions market to help deal with the glut of allowances and ease cuts needed after 2020.

“If the trajectory were to be aligned with the EU long- term targets in 2013, this could already be met with relatively modest efforts and a reduction factor of 2.2 percent,” the lobby group said in a position paper published on its website and dated Oct. 16. Under current rules, the factor is 1.74 percent a year.

The commission should only proceed with its plan to temporarily curb supply if that’s a first step toward more permanent fixes, the lobby group said. That plan is known as backloading because the supply would probably be returned later in the decade.

“Frequent market interventions or the rumors of such to mitigate the effect of the respective preceding market intervention would completely destroy the trust of market participants in an orderly functioning market and would be the worst possible result,” the lobby said.

The December volume of EU contracts jumped 22 percent to a record 31 million tons. The front-December-contract record of 52.2 million tons was reached on June 23, 2011, ICE data show.

To contact the reporters on this story: Ewa Krukowska in Brussels at ekrukowska@bloomberg.net; Mathew Carr in London at m.carr@bloomberg.net

To contact the editor responsible for this story: Lars Paulsson at lpaulsson@bloomberg.net


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